Thursday, 11 September 2014

The European Repo Market, the FTT and Moscovici, new Tax Commissioner

The European repo market was last in the news when the Commission issued its FTT proposals last year in February. France, through the voice of the new Tax Commissioner Pierre Moscovici, then Minister of Finance, immediately questioned the inclusion of the European repo market in the FTT plans:

To include such [repo] transactions will simply pose a major risk to the functioning
of the credit market.

Yet it turns out that the European repo market is European but in name.

Consider the membership of the European Repo
Council (ERC), the private lobby that champions the interests of the repo market
players in Europe. Of its 75 members in September 2014, 19 sit on the European
Repo Committee, the governing board of the ERC.
Eleven of these – five headquartered in the EU - are on the FSB’s 2013
list of Globally Systemically Important Banks (G-SIBs).

Table 1 Membership of the European
Repo Committee, September 2014

Headquarters

G-SIB

Not
G-SIB

Eurozone

Societe
Generale (Newedge), Deutsche Bank, Unicredit

Caixabank,
Bankia, Intesa Sanpaolo, Commerzbank

Europe

UBS,
HSBC, Credit Suisse, Barclays

US

JP
Morgan, Goldman Sachs, Citigroup

Asia

Nomura,
Daiwa

The

‘European’ repo market captures the systemic footprint of global banks headquartered in Europe and elsewhere. Its growth has been driven by what Haldane called the ‘collective migration’ of bank business models to interconnected, leveraged, high-yield trading activities.

About Me

i read and write on central banks and things to do with macro-finance. i occasionally rant against mainstream macro, the IMF's crisis conditionality and ideological blindess. I tweet here @DanielaGabor